News

Spending growth ends in nonresidential building and heavy project markets

0 121 Market Intelligence

Reed Construction Data chief economist Jim Haughey reports that nonresidential construction activity continues at a high level but has not expanded since last fall, after adjusting for project cost inflation. However five markets continue to expand.

Nonresidential construction activity continues at a high level but has not expanded since last fall, after adjusting for project cost inflation. However five markets continue to expand. The growth in construction spending from November to June is 19% for manufacturing, 17% for power (electric and gas utilities plus energy industries), 15% for water — entirely new treatment plants, 15% for hotels, mostly destination hotels and 8% for public safety buildings.

The slowdown is evident in the construction starts totals from Reed Construction Data. The YTD (July) value of starts was down 6% compared to the first seven months of last year. July starts were relatively weak after strong totals in May and June. Only a few small markets have clearly expanded: government offices (100%), libraries and m museums (43%), dams and marine (22%), parking garages 21% and airports (18%).

Among major markets the largest decline is for commercial buildings where reduced ROI prospects quickly caused project deferrals and cancellations. This slowdown is in response to the recession in the domestic economy and will quickly reverse when the recession end by year end. Then renewed, if modest, expansion in the commercial sector will resume.

U.S. Non-building (Heavy Engineering) Construction
(billions of U.S. current dollars)

  Monthly Figures*
(latest actual values)
 
  Actual Forecast
  May-08 Jun-08 2005 2006 2007 2008 2009
Transportation (% change is period
versus same period, previous year)
35.117 35.399 24.959 27.912 32.274 35.435 37.975
12.7% 12.8% -0.2% 11.8% 15.6% 9.8% 7.2%
Communication 27.131 26.697 18.948 22.234 26.937 27.354 28.363
  -0.7% -3.6% 23.1% 17.3% 21.2% 1.5% 3.7%
Power 68.310 70.850 35.403 39.846 52.769 68.63308 73.875
  29.6% 31.7% -7.7% 12.5% 32.4% 30.1% 7.6%
Highway 76.164 75.099 63.956 71.789 75.309 77.628 82.65
  3.6% 1.4% 8.7% 12.2% 4.9% 3.1% 6.5%
Water and Sewer 41.346 41.703 33.726 38.127 38.743 41.485 43.975
  5.5% 7.5% 10.4% 13.1% 1.6% 7.1% 6.0%
Conservation & Development 4.712 5.299 4.457 5.101 5.219 5.115 5.455
  -1.1% 4.7% 10.4% 14.4% 2.3% -2.0% 6.7%
Total 252.780 255.047 181.448 205.008 231.251 255.650 272.293
  10.5% 10.5% 5.4% 13.0% 12.8% 10.6% 6.5%

* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
The total includes some miscellaneous buildings.
Actuals: U.S. Census Bureau, Department of Commerce (put-in-place investment figures).
Forecasts and table: Reed Research Group.

U.S. Nonresidential Construction
(billions of U.S. current dollars)

  Monthly Figures*
(latest actual values)
Annual Figures
  Actual Forecast
  May-08 Jun-08 2005 2006 2007 2008 2009
Lodging (% change is period versus
same period, previous year)
38,084 38,659 12,840 17,984 28,602 37,508 41050
37.36% 57.58% 3.85% 40.06% 59.04% 31.14% 9.44%
Office 72,144 72,608 45,857 54,170 64,702 72,686 76,450
  16.64% 14.52% 8.44% 18.13% 19.44% 12.34% 5.18%
Commercial (mainly retail) 89,094 88,894 70,248 76,673 88,478 89,207 89,850
  0.75% 17.60% 4.90% 9.15% 15.40% 0.82% 0.72%
Health Care 45,596 45,813 34,413 38,489 42,904 45,546 48,850
  9.38% 6.18% 7.04% 11.84% 11.47% 6.16% 7.25%
Education 104,082 102,712 79,575 85,081 96,085 104,345 112,813
  9.01% 15.96% 7.42% 6.92% 12.93% 8.60% 8.11%
Religious 6,704 6,685 7,743 7,746 7,454 6,918 7,235
  -9.88% -4.91% -5.07% 0.05% -3.77% -7.18% 4.58%
Public Safety 12,226 12,032 7,284 7,800 9,869 11,938 12,614
  26.38% 30.73% 4.02% 7.09% 26.52% 20.96% 5.66%
Amusement/Recreation 22,994 22,912 15,268 18,990 21,610 23,151 24,138
  4.18% 10.52% -8.50% 24.38% 13.80% 7.13% 4.26%
Manufacturing 55,944 56,749 30,012 35,113 42,538 54,584 56,575
  39.15% 12.82% 26.53% 17.00% 21.14% 28.32% 3.65%
Total 446,868 447,064 303,239 342,045 402,242 445,945 469,574
  13.25% 16.43% 7.00% 12.80% 17.60% 10.86% 5.30%

* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
The total includes some miscellaneous state and local government buildings.
Actuals: U.S. Census Bureau (Department of Commerce) (put-in-place investment figures).
Forecasts and table: Reed Construction Data.

by Jim Haughey

Leave a comment

Or register to be able to comment.